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The Role Of Financial Advisor In Turbulent Times

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The Role Of Financial Advisor In Turbulent Times
Deepika Asthana - 28 February 2020

When you fall severely ill or maybe have a high fever do you consult a doctor or do you simply continue with home remedies? Similarly, when it comes to making important financial decisions do you consult an expert financial advisor or do you decide to adopt a do it yourself or DIY approach or worse still do nothing? While for the former question many of you would have opted for a doctor ie., a trained professional, for the latter it is highly likely that most of you would have gone a DIY approach. However, just like treating your ailments at home can be harmful to your health, managing your finances without expert advice can be harmful to your financial health. A financial advisor can help you in many ways. Some of the key ones are discussed below:

Guide you through the portfolio building process – in order to build a robust long-term portfolio that can help you reach the financial goals you need to ensure two things: 1) that the portfolio composition adequately reflects your risk-return requirements and 2) that the portfolio is well-diversified across different asset classes. A financial advisor can do a risk profiling for you to assess your ability and willingness to absorb risk. He/she can then suggest investment options across multiple asset classes that adhere to your risk profile and are capable of generating the required returns.

Provide you with knowledge and information – since the investment landscape is constantly changing, it becomes challenging for an individual investor to stay up to speed with all the market developments at all points in time. A financial advisor can regularly share with you, relevant information on the latest products and services available and educate you on the relative benefits and pitfalls of new, as well as, existing investment products. Having relevant information means that you can take portfolio decisions from a position of strength.

Handhold you through turbulent times and minimize the negative impact of human biases – we all have inherent biases that can be detrimental to our ability to make astute decisions. These biases get heightened during turbulent times when sharp movements in asset prices can cause us to make the wrong investment decisions. A financial advisor can not only help you create a comprehensive investment and asset allocation strategy but can also handhold you through turbulent times and encourage you to adhere to your overall asset allocation and portfolio strategy.

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